Retrospective amendment to disallow ITC on goods / services used for construction of plant or machinery: – Clause 119 of the Finance Bill, 2025.

Effective from 01st July 2017 retrospectively.

i) To replace the plant or machinery” with “plant and machinery” used in Section 17(5) of the CGST Act, 2017.
ii) Insertion of Explanation – To clarify that “plant or machinery” should always be understood as “plant and machinery,” even if there’s a previous judgment, decree, or order that might suggest otherwise. The clarification applies retroactively, meaning it overrides earlier interpretations made by courts, tribunals, or other authorities. The phrase “notwithstanding anything to the contrary” ensures that this clarification takes priority over any conflicting decisions or legal precedents.

iii) The Apex Court in the case of ‘Safari Retreats’ had distinguished the term ‘Plant or machinery’ with ‘Plant and machinery’. Further, it allowed ITC on goods / services used for construction of ‘Plant or machinery’.

iv) With an objective to negate this judgement, the Government has brought in a retrospective amendment w.e.f 1st July 2017. This would now be construed as ‘Plant and machinery’. Therefore, it purports to disallow ITC on goods / services used for construction of land and building w.e.f 1st July 2017.

v) The sanctity of the retrospective amendment disallowing all past ITC is yet to be tested in the Court of law. There are quite a few Apex Court judgements which prohibit any retrospective amendments which are adverse to the taxpayers.